There has been much discussion and speculation surrounding the city’s efforts to attract proposals for a potential public-private partnership (P3), via a long-term lease, for the transformation of St. Louis Lambert International Airport into a first-class airport. Unfortunately, there are some who see airport privatization as a “trick” when in reality there are many “treats.”
For decades, airports have struggled finding money for terminal improvements for passengers and cargo; there was a global shift from “public” to partial or full private management by 1987. Congress later enacted an Airport Privatization Pilot Program to test the idea that private capital and management could improve U.S. airports.
The traditional airport business models used in the U.S. are very long-term leases that give airline “anchor tenants” considerable control over terminals, gates and potential expansion. Those models ignore the fact that airports dominated by a single carrier are vulnerable to strikes and bankruptcy (the downfall of TWA and its impact on Lambert is a prime example).
Airport P3s in most cases consist of a long-term lease and/or concession agreement, due to the fact that airports (unlike most infrastructure investments) have a dual income stream from the aeronautical side (landing fees, contracts with carriers) and from passengers (parking, shopping, hotels). Historically, airports in public hands haven’t been effective in the non-aeronautical side of the business, which can become one of the biggest sources of income.
There are many airport privatization success stories.
The Luis Muñoz Marin International Airport in San Juan, Puerto Rico, entered into a 40-year lease agreement, with an up-front payment of $615 million, an additional $552 million over the term of the lease, and a commitment to invest $1.4 billion in the airport. A New York Times article highlighted the renovation/transformation of the airport’s two aging terminals that included new retail stores and restaurants and new automated baggage scanners.
Airport P3s to design, build, finance, operate and maintain specific components of a U.S. airport are on an upswing.
The Port Authority of New York & New Jersey (PANYNJ) utilized this concept for the new Terminal 4 at Kennedy International Airport as well as for a replacement for the aging Terminal B at LaGuardia Airport. Private operators will invest $2.5 billion in the project, with the PANYNJ putting another billion into parking structures and adjacent improvements. There is also a $10 billion upgrade program for Kennedy International Airport, to be financed largely with private capital using a P3 approach.
Los Angeles World Airports began a $5 billion Landside Access Modernization Program for LAX utilizing a P3. Denver’s airport P3 includes a revenue share after a major redesign and expansion of its terminal. Austin, Texas, is using the same process for the redevelopment of its South Terminal.
At Paine Field, north of Seattle, the P3 agreement provides for private operators to pay for a new terminal and operate it for 30 years; the agreement attracted three airlines Alaska, Southwest and United. And Gary, Ind., recently entered into a $100 million P3 10-year contract, with six possible five-year renewals.
In San Diego County, Calif., a $120 million P3 includes land approved for the construction of a 340-room hotel, shopping center, rental car facility and gas station (in 2018 the airport won the Air Transport World Passenger Experience Achievement Award).
With a potential for over $1 billion in upfront money and ongoing revenue sharing, a St. Louis P3 represents the greatest opportunity for significant investment in north St. Louis since 1870, when African-Americans settled in Elleardsville (the historic Ville neighborhood).
P3s are job creators; jobs and infrastructure development are linked. Calculations by the Bay Area Council Economic Institute for construction of new non-residential structures indicate that $1 billion in infrastructure investment creates approximately 13,468 jobs.
North St. Louis should embrace the possibilities and fight for the opportunity … to demand and receive the type of investments that fulfill the Rev. Dr. Martin Luther King Jr.’s dream of economic equality. King’s words from his March on Washington speech in 1963 still ring true: “One hundred years later, the Negro lives on a lonely island of poverty in the midst of a vast ocean of material prosperity. … In a sense we’ve come to our nation’s capital to cash a check … that will give us upon demand the riches of freedom and the security of justice.”
And in this context, justice for north St. Louis is access to that “vast ocean of material prosperity” that airport privatization potentially brings.
Adolphus M. Pruitt, II
President, St. Louis NAACP